HK well positioned to offer cutting edge 3G services

date: September 19, 2001

Today marks an important milestone for the development of Hong Kong's telecommunications industry, Secretary for Information Technology and Broadcasting, Mrs Carrie Yau, said.

Speaking at a press conference after the completion of the pre-qualification process of the 3G auction in Hong Kong today, Mrs Yau said Hong Kong was well positioned to offer cutting edge 3G services and content.

Four applications for 3G licences in Hong Kong were received and in accordance with the rules set out in the Information Memorandum which provided guidance for the 3G spectrum auctioning. The four bidders have each been provisionally awarded a licence at reserve price, i.e. 5% royalty subject to a minimum payment of HK$50 million for each of the first five year, and rising minimum payments from year six onwards.

"We welcome the result of this exercise because both the number of licences and the price have been determined by the market," Mrs Yau said.

"Our auction design which aims to ease the financial burden for licensees is quite unprecedented. It is an efficient, fair and transparent way of awarding licences. We have achieved our objectives," Mrs Yau emphasized.

The four provisional successful bidders are:

- Hong Kong: a company jointly owned by Telstra (60%) and Pacific Century CyberWorks (40%);

Hutchison 3G HK: a company jointly owned by Hutchison Whampoa (75%) and NTT DoCoMo (25%);

SmarTone 3G: a company wholly owned by SmarTone Telecommunications Holdings; and

SUNDAY 3G (Hong Kong): a company wholly owned by SUNDAY Communications.

When asked to comment on the proceeds to Government, Mrs Yau said, "Our primary aim of holding an auction was not to maximize Government revenue. On the total proceeds, if you use a discount rate commonly adopted by market analysts, say 12.5 per cent, the income for Government for issuing four licences is at least HK$1.9 billion, based on the minimum guaranteed payments Government will receive."

The Government's policy objectives in the 3G licensing exercise are to promote the development of the industry in Hong Kong, to protect interests of consumers and to maximize benefits to the economy as a whole.

Taking into account the current market situation worldwide and the characteristics of the Hong Kong market, the Government adopted a hybrid method for the issue of four 3G licences. The innovative licensing approach involved a pre-qualification process followed by spectrum auctioning which was carried out on the basis of royalty percentage, subject to a minimum guaranteed payment.

The Government also spearheaded the introduction of an Open Network Access (ONA) framework in which 3G licensees have to make available up to 30 per cent of the capacity of their networks for use by non-affiliated service providers. This will ensure a vibrant and open 3G applications and service market.

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